Goyal’s NRI status may delay Jet-Etihad deal

Jet Airways’ plans to sell 24 per cent stake to Abu Dhabi-based Etihad has hit yet another air pocket. The Government is now examining whether NRI owner Naresh Goyal’s share in the airline should be considered as Foreign Direct Investment.

If the Department of Industrial Policy and Promotion decides that the NRI stake has to be counted in the 49 per cent FDI cap for investments in the civil aviation sector, the company will have to come up with a fresh proposal. Under the existing plan, the investment will breach the FDI limit, a DIPP official told Business Line.

No clarity

“The FDI policy does not clearly say if NRI investments are to be included or excluded in the FDI calculation for the civil aviation sector. The DIPP is examining this and will submit its views to the Foreign Investment Promotion Board,” the official said.

The FIPB will take a call on the Rs 2,000-crore Jet-Etihad deal based on DIPP’s report. “Since DIPP is the policy-making body for foreign investments, the FIPB is likely to go by what it decides on the issue,” the official added.

The FIPB, which is scheduled to meet on Friday, may drop Jet-Etihad’s proposal from the agenda if a view is not taken on the matter by then.

Last month, Jet Airways Chairman Naresh Goyal bought 3.18 crore shares, amounting to 36.85 per cent stake in the company, which raised his share in the company to about 66 per cent. The acquisition was in line with the company’s plans of vesting 51 per cent stake with Goyal, 24 per cent with Etihad, and 25 per cent with the public post the deal.

The Government recently allowed foreign airlines to invest up to 49 per cent in private domestic carriers.

Although foreign investors not in the airlines sector were allowed to pick up 49 per cent in airlines under the previous policy, foreign carriers were not allowed to do so because of security reasons. NRI investors, on their own, are free to hold 100 per cent stake in the aviation sector.

The proposed Jet-Etihad deal had initially faced hurdles when the Civil Aviation Ministry had objected to it on the ground that the FDI policy did not allow investments in brown-field projects. The DIPP then clarified that the policy did not distinguish between green-field and brown-field investments.

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